First film futures market expects approval soon

James Cameron, nominee for best director for "Avatar", arrives at the nominees luncheon for the 82nd annual Academy Awards in Beverly Hills, California February 15, 2010. REUTERS/Mario Anzuoni

BOCA RATON, Florida (Reuters) - Media Derivatives Inc expects to be the first U.S. exchange to get regulatory approval to offer futures on film box office receipts, the privately owned company said Wednesday.

The new market, dubbed Trend Exchange and based in Scottsdale, Arizona, is slated to get the green light from the Commodity Futures Trading Commission approval on March 24, and plans to begin trading by midyear, CEO Robert Swagger said in an interview on the sidelines of the annual Futures Industry Association conference in Boca Raton, Florida.

It is the second exchange in the last month that has announced plans to launch futures tied to film box-office receipts this year.

But unlike Cantor Fitzgerald, the broker-dealer whose exchange is slated for regulatory approval next month, Trend Exchange will target institutional investors, including the banks and other financiers of the film industry, which generated nearly $30 billion of receipts worldwide last year.

“It’s the right place and right time to build an exchange,” Swagger said. While other futures exchange start-ups have largely tried to wrest market share from existing exchanges, he said, Trend Exchange has a better chance of succeeding because it is an entirely new market.

The exchange will clear through Minneapolis Grain Exchange, he said.

Last year U.S. film production slid 12 percent, in part because of the dearth of available financing after the financial crisis and the ensuing credit constriction.

Film financiers, which pour an average $107 million into producing the average U.S. film, have had limited options for hedging their exposure to a potential flop.

With a ready way to protect against such losses by using contracts on the new exchange, financiers may be more willing to extend backing, Swagger said.